Perfect Imperfection:

Contrarian Investing During a Sell-Off

Megumi Chen, CFA, Quantitative Investment Analyst, Multi‑Asset
David J. Eiswert, CFA, Portfolio Manager, International Equities
Sébastien Page, CFA, Head of Global Multi-Asset
Robert Panariello, Associate Director of Research, Multi‑Asset
Key Insights
  • Investors are often obsessed with timing the market perfectly—of finding the exact moment a bull market peaks or a bear market hits a bottom.
  • Our analysis of 17 major drawdowns over 90 years suggests that investors who add risk during a sell-off can mistime the bottom and still make major gains.
  • Our analysis shows increasing allocation to stocks one month either side of a trough may deliver significant returns a year later.

Knowing the precise moment that a bull market peaks or a bear market hits a bottom would offer guaranteed success—and a very early retirement. But our analysis of severe downturns over the past 90 years suggests that it is not necessary to time the bottom precisely.

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Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of May 2020 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc.

© 2020 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.

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